Krugman explains national debt (vs. personal debt) once more

Some seem to have great difficult grasping the ideas, but I think Krugman is quite clear in today?s NY Times column:

In 2011, as in 2010, America was in a technical recovery but continued to suffer from disastrously high unemployment. And through most of 2011, as in 2010, almost all the conversation in Washington was about something else: the allegedly urgent issue of reducing the budget deficit.

This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans. But it also revealed something else: when people in D.C. talk about deficits and debt, by and large they have no idea what they?re talking about ? and the people who talk the most understand the least.

Perhaps most obviously, the economic ?experts? on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!

And while they?ve been waiting, those rates have dropped to historical lows. You might think that this would make politicians question their choice of experts ? that is, you might think that if you didn?t know anything about our postmodern, fact-free politics.

But Washington isn?t just confused about the short run; it?s also confused about the long run. For while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem?s size.

Deficit-worriers portray a future in which we?re impoverished by the need to pay back money we?ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don?t ? all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.

Second ? and this is the point almost nobody seems to get ? an over-borrowed family . . .

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Source: http://leisureguy.wordpress.com/2012/01/02/krugman-explains-national-debt-vs-personal-debt-once-more/

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